Gold slips but economic uncertainties support

By Frank Tang

NEW YORK (BestGrowthStock) – Gold slipped less than 1 percent on Monday despite a sharp return of risk appetite, as uncertain economic fallout related to the euro-zone’s debt crisis bolstered the metal’s safe-haven appeal.

A $1 trillion global emergency package to stabilize the euro lifted platinum group metals to their firmest since 2008.

Mihir Dange, a COMEX floor trader, said that gold was holding relatively firm as the massive $1 trillion bailout could lead to negative economic implications and could weigh down on the euro in longer term.

Also, gold’s inverse link with the dollar could remain weak for the near term, Dange said.

“Until there is some normalcy back into the market, the correlation you might see is that gold may trend with the stock market and the dollar, as opposed to the euro,” he said.

Last week, gold had climbed 4 percent due to contagion fears, while U.S. gold coin sales also surged, as the U.S. Mint sold gold coins at twice its normal pace, and a leading retailer said Thursday was a record day. (ID:N07627392: )

Spot gold was at $1,200.25 an ounce at 3:04 p.m. EDT (1904 GMT), against $1,207.75 late in New York on Friday. It sharply cut losses after trading as low as $1,183.85 in early trade.

U.S. June gold futures on the COMEX division of the NYMEX settled down $9.60 at $1,200.80 an ounce.

The global aid package reversed last week’s sharp decline in world financial markets. The euro rallied and the S&P 500 index (.SPX: ) jumped 3.5 percent. (FRX/: ) (.EU: ) (.N: )

“Today we are seeing a reversal of previous safe-haven flows,” said Tobias Merath, an analyst at Credit Suisse. “The medium-term consequence of what is going on is probably easier monetary policy.”

But the package left longer-term questions about whether Europe’s weakest economies can manage their debt. (TOPWRAP: )

Goldman Sachs said that gold prices in the near term would benefit from low real interest rates and accommodative U.S. monetary policy.

“Longer term, however, we continue to see considerable downside risk, should the U.S. Federal Reserve tighten monetary policy earlier than expected,” Goldman said in a note.

PHYSICAL DEMAND PICKS UP

Falling gold prices benefited physical demand, with a 3 percent drop in Indian prices triggering buying of the metal there ahead of a key festival, dealers said.

Other commodities largely rallied on news of the European rescue package in line with assets seen as higher risk. Oil prices surged 2.5 percent to their highs on Monday, and base metals prices also jumped. (O/R: ) (MET/L: )

Platinum group metals also rose, with palladium climbing more than 3 percent and platinum up 2 percent. Both reflect strong underlying fundamentals, analysts said.

Palladium rallied to a two-year high and platinum to its strongest since July 2008 earlier this year as hopes for a recovery in car demand boosted buying, before coming off initial highs.

Platinum was last at $1,690.50 an ounce against $1,656.50, and palladium at $526 against $510.

Silver was at $18.43 an ounce against $18.30.

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(Additional reporting by Jan Harvey in London; Editing by Marguerita Choy)

Gold slips but economic uncertainties support